PRO BONO AND CONDITIONAL FEE AGREEMENTS

Posted by Rachel Holland on May 16 2023 in News

In my experience with lawyers, their passion for helping their clients is a common theme. They confidently provide a valuable service that positions clients for a positive future, gets them out of a current predicament, sets expectations for relationships, and protects relationships from misunderstandings. This personal driver to serve motivates lawyers to take on worthwhile cases where the client is not eligible for legal aid and where justice is not getting served through a lack of ability to fund the process.

Under these circumstances, a lawyer will take on a case in a pro bono arrangement or a contingency fee agreement. These cases are very rewarding for those involved, and give all who work in the firm funding the matter, a sense of pride in the values the firm is demonstrating.
Many law firms have pro bono policies to promote and encourage their lawyers to engage in a percentage of this work annually, and to recognise and reward the activity.  

Having said that, with all the altruistic intentions in the world, these arrangements are fraught with pitfalls for clients and lawyers. And as such, the New Zealand Law Society regulates the service to safeguard integrity.

Firstly, how do these arrangements differ?  

In a conditional fee agreement, the law firm only takes its fees if the case is successful. In pro bono arrangements, the lawyer may seek costs from the other side if successful but does not have a claim to fees from any award secured for the client.

The Lawyers and Conveyancing Act 2006 (LCA) does not differentiate between pro bono and fee-producing work. The lawyer must approach all work with the same level of care and fiduciary duties.  Non-fee-paying work cannot be put on a back burner behind profitable work, must be undertaken by lawyers with the appropriate skillsets, and the lawyer must do everything expected of them to obtain the best outcome for the client.  Notwithstanding the client is not a fee-paying client, the client engagement process is still required, the client must be kept appraised of their matter and if the client is not happy with the service, they are entitled to follow the firm’s complaints process through to the NZLS if required.  The same NZLS rules apply to a lawyer wishing to withdraw from a pro bono matter, as from a fee-paying matter.  

As with all law firm engagements, the scope of the work must be clearly described in the letter of engagement. For example, whether the pro bono arrangement covers a mediation only, or goes through court proceedings if unsuccessful at mediation. It is prudent for the lawyer and client to have agreed and clearly defined an understanding of what a successful outcome would look like. This prevents the client from being pressured to accept an unacceptable outcome, and, conversely, protects the lawyer from being asked to continue to work towards an unrealistic outcome.  
If the law firm wishes to claim costs from the other party, they will need to record costs as they would in a fee-paying arrangement.  If there are no costs recorded, there are no costs to claim.  

A conditional fee agreement is put in place in circumstances where the client and the law firm agree to share the risk of the litigation. If the litigation is successful, the lawyer may charge some or all their costs.  In these circumstances, the lawyer may charge the costs plus a premium to compensate for the risk of not being paid at all, and for the disadvantages of delayed payment.  

These arrangements require a conditional fee agreement to be agreed by the lawyer and the client - defining what success looks like, how fees will be determined in the circumstance of success, how costs other than lawyers’ fees, such as filing fees, are handled throughout the matter, how either party may terminate the arrangement, and what happens if the client becomes liable to pay the costs of any other party, amongst other things.  
In accordance with the LCA rules, the total fee must be fair and reasonable, and contingency work must meet the same standards as fee-paying work, just as required for pro bono work.  

Pro bono and contingency fee arrangements are often fueled by morals or principles and ultimately exist to afford persons who may not otherwise have it, access to justice. For this reason, they can be entered into with well-intentioned verve, and pausing to consider the parameters of the arrangement can feel counter to the intent of the lawyer/client collaboration. However, it is  not only important to the ultimate sense of satisfaction for the partnership, but it is required by regulation.  

If you are a client seeking legal representation, discuss the terms and scope of work with your lawyer and clarify any questions or concerns you may have before entering into an arrangement. By working together and adhering to regulations, both clients and lawyers can benefit from pro bono and contingency fee arrangements.

Rachel Holland | Practice Director | Rachel.Holland@shieffangland.co.nz